How we make investment decisions

In order to grow your pot, there are a number of decisions we have to make when it comes to investing your money

When you invest your money with us, it’s put straight to work. Whatever your position – whether you’re keen to take some risk, or you’re on the more cautious side – we’ll put your money into a carefully selected range of investments to get you the best returns possible, and grow your pot. But how exactly do we make these important decisions?

We consider what you want

Before we invest your money, it’s important that we understand what your requirements are, and how large, or small, your appetite for risk is. “Each of our members can have different risk appetites,” says Piers Hillier, Chief Investment Officer at Royal London Asset Management. “We could put together aggressive strategies for people who are very enthusiastic, but over the long term the balance between risk and reward is really important, and so we try and blend assets together in order to give you a better overall outcome.”

We create the right mix of investments

Putting all your eggs in one basket is risky, because investments don’t always perform well. So, we spread your money over a range of asset classes to reduce your risk and give you the best possible long-term returns. These include investments that we expect to grow quite rapidly over the long run – for example, company shares, property, and commodities such as grains, metal or oil – and ones that are more of a store of value, to protect the money that you’ve built up so far – such as government bonds. We invest in cash, too. “That allocation, or how much we invest in each, really depends on your specific risk appetite,” says Piers.

We design our strategies for you

We want to take every opportunity to grow your money, so we put together short and long-term investment strategies. “We work very closely with actuaries, who study the management of risk and uncertainty, to understand your requirements,” says Piers. “Then we put together an appropriate mix of investments that meet those requirements, and work out what returns we think we can generate for you over the long term – it’s what we call strategic asset allocation.” Strategies are reviewed on an ongoing basis to ensure we’re making the best decisions when it comes to your money.

“We also have tactical asset allocation, where we look at markets and the current economic cycle to make shorter-term decisions, which hopefully generates additional returns for policyholders,” explains Piers.

We look at what’s going on outside

The economic cycle and current market conditions are really important when it comes to your investments, so we always pay close attention. “Over time, we go through periods of enthusiasm and not so great enthusiasm,” says Piers. “And at each stage in this economic cycle, different asset classes perform in different ways. So, for example, when things are good, often equities and property can do very well, but when things are a bit more difficult, government bonds and cash can be seen as more attractive investments in the short term. With the economic cycle in mind, we try and balance out long-term requirements with short-term or immediate needs.”

We’ve got your best interests at heart

The great thing about Royal London is that we’re a mutual. “Because of this, our interests are uniquely aligned with yours,” says Piers. “So not only do we provide the best possible outcomes for you, in terms of investment returns, but by owning the business you directly benefit from our success. We run the mutual as a business to try and generate additional returns that come back to you in the member dividend – if we’re successful, that improves outcomes for you in the long run.”